One of the project investment tools that capture the attention in the world of cryptocurrencies are IEOs or Initial Exchange Offers, which seek to be a safer substitute for the well-known ICOs and thus provide a door that opens the way to the financing of projects on blockchain technology and DLT in the world. 

UOne of the investment tools that has taken a great space in the crypto world are the well-known Initial Exchange Offering (IEO or Initial Exchange Offerings), which seek to capture the attention of investors so that they invest early in investment projects. cryptocurrencies, blockchain or DLT technology that a future can offer great returns to its initial investors.

Surely this definition is very similar to the Initial Coin Offering (ICO or Initial Coin Offerings), and the reality is that it is. In fact, their objective is the same, the only thing that changes are the forms. This is because in general IEOs are presented through exchanges recognized who study and endorse the project. In addition, the exchanges are in charge of raising funds for the startup or company that seeks to develop the project. This situation provides a certain assurance that the projects have some technical feasibility in addition to granting a visible, recognized and trustworthy face.

However What other advantages do IEOs offer us? Why are they presented as a better option compared to ICOs? Well this and more you will know below.

The beginning of IEOs

The birth of the IEOs had its greatest impulse in the different negative circumstances experienced in the "ICO boom" 2017. In that year, ICOs became one of the most used vehicles for startups to obtain investments that will boost their projects. The idea is simple, present a project to be developed or under development, with its vision, objectives and technical specifications, if you are there. And next to all this, present a coin or token that it had to be bought to obtain or not a significant participation as soon as the project was underway. Seen in this way, it looks a lot like a purchase of stocks or shares in a IPOOnly ICOs had two serious problems.

In the first place, the project was often non-existent or at times it was total nonsense, and secondly, there was no security of any other kind when you bought a token. Basically participating in an ICO was an "economic leap of faith", in which the investor gave money to people who could be perfect strangers who could disappear from one moment to another with your money and that of thousands of people who participated in ICOs . Results? 2017 was the Wild West, even more than normal. A host of scams, ghost projects, and unicorns that left multi-million dollar losses around the world. In that scenario, ICOs quickly lost their momentum, investors were fearful and quickly looked for new, safer alternatives. It is there where the STO (Security Token Offering or Security Token Offering) and of course, the IEOs (Initial Exchange Offering).

But surely you wonder What makes IEOs a better alternative to ICOs? Well, basically because an IEO is nothing more than an ICO where the offer is controlled by an exchange. That is, when you buy tokens in an IEO, you are actually buying tokens from a project endorsed by the exchange that serves as an intermediary between you and the developers of that project.

At this point, the exchange is a trusted third party that the investor decides to trust to make an investment in a project. This also leads exchanges to be careful about the projects they support, as their trust is at stake in all this, so promoting fake or impossible projects can lead them to lose huge amounts of money and undermine all their trust. In addition to this, the tokens in an IEO usually create a fast market since it is possible to buy and sell those tokens in the exchange launched by the IEO.

Differences between an IEO and an ICO

Now, you want to know exactly what the differences are between an IEO and an ICO. Well, in that case we can highlight the following major differences:

  1. An IEO is highly centralized. One of the first differences we see between an ICO and an IEO is that the latter is highly centralized. This is because everything is controlled by the exchange and the project developers. On the contrary, an ICO is usually more decentralized, since many of them are carried out through smart contracts. However, this point for ICOs is not a guarantee of decentralization either, because the smart contract can simply be a facade.
  2. To create an IEO, the project must show a minimal operating model of the project and also meet the acceptance requirements of the exchange. When we speak of minimal performance we refer to a MVP (Minimum Viable Product or a Minimally Viable Product). An MVP means that the project presented must have active some of the functions that it seeks to present to the public once developed. On the other hand, the exchange, its advisers and specialists impose certain conditions for the IEO to take place. The idea behind all this is to have a minimally functional product that gives exchanges and investors confidence in the project. On the contrary, in an ICO generally the existence of an MVP is a dream, and some projects do not even show a whitepaper thereof.
  3. An IEO guarantees that the token will have a secondary market after the pre-sale. In an ICO there are no guarantees of this and it may take months or years for the token to appear on an exchange.

How much do you know, cryptonuta?

Can IEOs guarantee returns on our investments?

FALSE!

Like any investment, this one carries risks, including the risk of losing everything you invest. Although an IEO reduces the risk of scam, they do not guarantee the return and return on your investments, so keep this in mind when making investments in them.

How can I participate in an IEO?

Now, if what you want is to participate in an IEO, the best way is to be attentive to the different cryptocurrency exchanges and review their IEO offers, or also, visit specialized IEO sites and review the offers that are made there. Some of these sites are Coincodex o ICOMarks, two websites where you can see a fairly complete list of IEOs active on different exchanges.

Once you have chosen an IEO of your interest, you should look at which exchange offers access to it. This is important because to participate in the IEO you must register with said exchange. The next thing will be to do the KYC / AML of the exchanges giving all the personal data that they ask for, as well as, activating all the security and authentication options of the exchange. In this way, you can buy the tokens you want and have an additional security layer to prevent theft of your funds. It is worth telling you that these layers of security help you to avoid theft directly to your person, if the exchange is hacked you could have problems to recover your money, hence the recommendation not to have large amounts of money in them.

The next thing is to simply buy the tokens of the IEO in which we want to participate. This process is different for each exchange in question, so you should first familiarize yourself with the purchase process of the exchange where you register. You can buy bitcoins on Bit2Me, deposit them in the exchange managed by the IEO and exchange them for the token.

However, one thing is for sure, investing in an IEO (like any other investment) is a risk, it can go well or badly, so you must be aware when investing. Our best recommendation in this regard is that you do not invest money on which your future depends or that of your family, take care of your assets against investments as risky as these.

Pros and Cons of IEOs

Pros of IEOs

  1. First, IEOs generate greater confidence among investors when participating and investing in projects. This is mainly because exchanges risk their reputations when it comes to offering an IEO. Therefore, they use more or less rigorous criteria to choose feasible projects to promote under this system. In this way, exchanges control the sale of tokens, constantly reviewing the evolution of projects. And with that, they end up reducing the chances of scams or other dishonest actions.
  2. Another point in favor of IEOs is security. In an ICO, anyone can participate in the purchase and sale of these tokens. This is something that can be used, for example, for money laundering. However, these require a KYC / AML process (Know Your Client and Rules Against Money Laundering and Terrorism) to participate in it. This has two points in its favor: first, developers are people who know each other fully, and second, investors have a complete profile, so the responsibilities of an investment cannot be easily evaded.
  3. IEOs offer access to the token much easier. In fact, it is enough to register in the exchange and make the purchase of tokens of the desired IEO to participate. This is especially useful for people who are not very knowledgeable in handling cryptocurrency tokens or wallets.
  4. An additional point is the legal support and advice that many exchanges provide to investors participating in IEOs. Although this is usually a separate service, the fact that exchanges apply this is very positive. It also makes one thing clear to us: the legal framework has been studied to prevent investors from running the risk of breaking the regulatory framework where they live. That way investors can be calm and in case of problems, the exchange can help them solve them.

Cons of IEOs

Now, not everything is good in the world of IEOs, and some points against them are:

  1. Trust rests with a third party, if he acts dishonestly you could be the victim of a scam. This scenario is rare, most trusted exchanges give everything for their reputation, but there may be cases where that can be forgotten.
  2. IEOs have a serious decentralization and token distribution problem. This leaves most of these in the hands of a few. In this scenario, if the token increases in value, that value will go into the hands of a few who can manipulate the market at their convenience.
  3. The previous problem leads to another and that is that there may be circulation restrictions. This means that exchanges can control the amount of tokens at their convenience.
  4. The KYC / AML model can be annoying for people who do not want to give up their data and keep control of it.